Ottawa off the financial hook in $27B lawsuit aimed at cigarette makers

Steve Mertl

Daily BrewNovember 16, 2012

They're probably breathing a sigh of relief over at the federal Treasury after a court decision this week ruling Ottawa out as a defendant in a $27-billion class-action lawsuit launched in Quebec on behalf of smokers.

I guess as taxpayers, we should be relieved too, since the federal government would no longer have to ante up a share of any damages awarded if the group wins its case, which is directed primarily against tobacco companies.

It's fair to ask whether the government doesn't bear some responsibility for the horrendous damage done by smoking, given that tobacco products are subject to federal regulation and governments have subsidized Canadian tobacco growers.

The Quebec Court of Appeal overturned a lower-court ruling that tied the government to the suit, theToronto Starreported. The tobacco industry had argued that Ottawa should share the blame — and costs — for the adverse effects of smoking because it didn't do enough to alert the public about the dangers, the Star said.

But the Quebec Appeal Court sided with the federal government based on a 2011 Supreme Court of Canada ruling in a B.C. tobacco case regarding statements about the safety of low-tar cigarettes.

The high court, citing a 1989 ruling on government liability, found the government could not be held legally responsible for civil damages connected with government policy.

"The alleged representations constitute protected expressions of government policy," the court said. "Core government policy decisions protected from suit are decisions as to a course or principle of action that are based on public policy considerations, such as economic, social and political factors, provided they are neither irrational nor taken in bad faith.

"The representations in this case were part and parcel of a government policy, adopted at the highest level in the Canadian government and developed out of concern for the health of Canadians and the individual and institutional costs associated with tobacco‑related disease, to encourage people who continued to smoke to switch to low‑tar cigarettes."

The principle, entrenched in the 1989 case, is intended to keep governments from being restricted in making policy decisions based on social, political and economic factors, the Star said. It gives the government immunity on matters of policy, but not administration.

The reasoning behind the decision is understandable, though it could be debated. Without such protection, governments would conceivably be handcuffed from making policy by having to foresee every possible consequence that might arise.

After years of denying the health risks of smoking, the tobacco industry changed its strategy when the evidence became too strong to ignore.

The Star noted that internal documents show Imperial Tobacco Canada, a defendant in the suit along with JTI-Macdonald and Rothmans, Benson & Hedges, wanted to shift blame to the government.

"The tobacco industry in developed Western countries must bring itself to accept that the burden of guilt must be shifted to government ... the blood is not on the hands of manufacturers," Imperial president Jean-Louis Mercier says in a 1987 letter, according to the Star.

He goes on to admit the industry's previous strategy to deceive the public about the risks of smoking had now failed.

"If it is too late to change public perception, the target of the wrath can be changed, and this can be done relatively easily and quickly," Mercier wrote.

The Quebec Appeal Court ruling is part of a massive class action launched on behalf of 1.8 million Quebec smokers, CBC News reported.

The tobacco companies, who've argued their cigarette sales simply followed federal guidelines, had said they plan to sue Ottawa to recoup damages if they lose the case, The Canadian Press said. That strategy also seems gutted by the latest court decision.

The industry has 30 days to appeal this decision to the Supreme Court, but anti-tobacco activist Mario Bujold said the high court's previous rulings make that an unlikely prospect.

Chris Koddermann, director of corporate affairs for Rothmans, Benson & Hedges, told CP the ruling will not have any impact on its defence.

"One of our principal defences is Rothmans can't be held liable for conduct that has been, for decades, guided by the directives, policies and wishes of the federal government," said Koddermann. "That defence remains untouched by the Court of Appeal's ruling."

The company still intends to call federal government witnesses to testify in support of their defence, he said.

Imperial spokesman Eric Gagnon was disappointed by the ruling.

"From our perspective, we believe the federal government has been a senior partner of the industry and has been for decades, so it only makes sense for them to stand next to us in these class actions and respond to any allegations," Gagnon told CP.

The tobacco industry has been battling a wave of suits brought by smokers as well as provincial governments seeking to recover the costs of treating smoking-related disease.